U.S. airlines apply for U.S. payroll grants for crisis help


Reuters | Updated: 04-04-2020 03:44 IST | Created: 04-04-2020 03:44 IST
U.S. airlines apply for U.S. payroll grants for crisis help

Major U.S. airlines applied on Friday for payroll grants from the U.S. Treasury meant to keep workers employed while airlines ride out their toughest crisis in history due to the coronavirus, though some warned the funds are "not enough." American Airlines Group Inc, United Airlines Holdings Inc, Delta Air Lines Inc and JetBlue Airways Corp each said they had submitted grant applications but did not disclose how much they requested or what they offered in return for funds.

Treasury had asked companies to propose financial instruments such as warrants or equity options as possible taxpayer compensation for up to $32 billion in payroll grants for airlines, cargo carriers and airport contractors under the CARES Act passed by Congress last week. Treasury set a 5 p.m. EDT (2100 GMT) Friday deadline to expedite the grants. There is a second final deadline on April 27.

In a memo to employees, Delta Chief Executive Officer Ed Bastian said the company had applied for its share of worker-protection grants, but "those funds alone are not nearly enough." Delta expects a 90% decline in second-quarter revenue as it burns more than $60 million a day.

JetBlue said it is burning through over $10 million of its savings each day as it spends "far more on running the airline than we are making in revenue." Companies were allowed to request the amount they paid in salaries and benefits in the second and third quarters of 2019, and must agree to keep their workforce until Sept. 30 and maintain a certain level of air service.

American Airlines, with the largest number of full-time employees among U.S. airlines at 133,700 in 2019, had said it would seek up to $6 billion in grants and $6 billion in government loans under a separate $32 billion funding option for the sector. American stock hit a record low on Friday.

Southwest Airlines Co was also expected to apply for the grants, even though it and others have warned that the deep coronavirus crisis will force them to shrink in size. Warren Buffett's Berkshire Hathaway Inc, which is among the largest shareholders of the top U.S. airlines, said on Friday it sold about 18% of its Delta stake and 4% of its Southwest holding.

Among cargo carriers, FedEx Corp said it could benefit from certain government relief options after outlining other steps it is taking to save cash and boost liquidity, including slashing its chief executive officer's pay and drawing down $1.5 billion from a credit facility. Cargo carriers are suffering from disruption to global supply chains and high-margin business-to-business demand, even as ground-package delivery services increase.

Airlines have also raised debt and taken a series of cost-cutting measures as they ground an unprecedented number of planes and implement new policies on ticket refunds and exchanges in an effort to encourage passengers to book flights. Passenger airlines are eligible for $25 billion in cash grants, cargo carriers $4 billion and airport contractors like caterers and airplane cleaners $3 billion, and an equal amount in loans.

Other airlines across the world are also seeking government aid as they brace for a prolonged downturn, with Air France-KLM in talks with banks to receive up to 6 billion euros ($6.5 billion) in loans guaranteed by the French and Dutch governments, sources told Reuters. Planemakers are also preparing for a slump in demand, with Reuters reporting on Friday that Airbus SE is studying a sharp cut in output of its top-selling A320 jet series.

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)

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